13th July 2016
Millennials, aged 16-34, face increasing financial difficulty and an overreliance on debt, according to the Momentum UK Household Financial Wellness Index.
The index, commissioned by fund manager Momentum UK and conducted by the University of Bristol’s Personal Finance Research Centre is the first research of its kind to look at the overarching financial wellness of the UK. It found that nearly a third of young people (31 per cent) are relying on credit to assist their money management, raising concerns that history may be repeating itself among the post-recession generation.
Millennials are missing payments
The Momentum Index’s findings indicate that young people are more likely to miss credit repayments. Given their widespread use of credit to make ends meet, it could lead to damaged credit scores and exorbitant late payment charges. Two out of five young people (36 per cent) have been unable to meet their minimum repayments on their credit commitments at least once in the last year. One in five younger consumers (19 per cent) have also been unable to pay one or more of their bills at the final reminder. At present, 17 per cent of all young people also have a credit or store card that they use.
Ferdi Van Heerden, CEO, Momentum UK says: “We have entered a period of economic uncertainty following the vote to leave the EU – in which 73% of young people planned to vote for Remain. The split between old and young on this issue, is perhaps much clearer when we consider the financial difficulty already faced by the younger generation”
“The over-reliance on credit among millennials is a real cause for concern, particularly when you consider the punishing rates often imposed on younger people accessing credit. We must ensure that young people know the dangers of using these methods and that they know how to do so responsibly, or we run the risk of yet another generation feeling the consequences of living beyond its means.”
Young people struggle to manage their day-to-day finances
The Index found that young people tend to have the poorest organisational skills of any age group when it comes to their finances. One in four young people (24 per cent) do not track their day-to-day spending closely and a similar number (21 per cent) have no formal budget in place to keep an eye on their costs. Also nearly half of young people (53 per cent) would struggle to fund an unexpected expense without borrowing money, perhaps accounting for the prevalence of debt amongst this group.
The lack of money management skills is having a marked effect on the financial wellness of the younger generation. Nearly 2 in 3 young adults have no dedicated savings or investments (63 per cent) and a further 28 per cent have less than £100 set aside. These dire circumstances has had a marked effect on the attitude of younger people with nearly one in five (18 per cent) have no confidence in either their short term or long term finances
Van Heerden says: “The Government’s ongoing investigation into ‘intergenerational fairness’ underscores the concerns that the UK’s current financial system greatly privileges older consumers and that younger working people are struggling financially – this is certainly borne out by our research findings. The Financial Wellness Index demonstrates that financial wellness of the older generations are much stronger than younger ones, showing an improvement of 0.1 Index points with each year of increased age. It is imperative that we address this disparity and give the next generation a real chance to build their finances in aid of their future.”
You can find out more and get your own financial wellness score visit on the following link – yourwealth.co.uk/financial-wellness